Environment

Background

Towards a World Bank Group Strategic Framework on Climate Change and Development

13 April 2008

This meeting consisted of a brief presentation on the World Bank’s climate change strategy that will be discussed at a closed session over the next few days in Washington. By the Bank’s own admission, key questions for clarity over the upcoming processes and provisions for public consultation, government representation, and definitions of clean technology remained woefully inadequate. The failure of the clean development mechanism to benefit Africa, and the inadequacy of the Bank’s carbon finance funds to tackle climate change and renewable energy-scale up was also raised. Doubts were raised over the World Bank’s involvement in climate change, given the failure of the Global Environment Facility since its approval in 1992 to make the Bank’s operations climate and biodiversity friendly. The Bank’s institutional obstacles and barriers were raised as a serious impediment. The importance of good and coherent policies was emphasised.

Bruce Jenkins, Policy Director, Bank Information Centre, Chair

Introduced the key issues and stated the need to consider the role of borrowing countries in decision making. He also expressed concern that if we are to look at Bank’s portfolio will we see a carbon light layer spread on a rich carbon deep filling.

Warren Evans, Director, Environment Department

(ref to attached presentation for detail)

There are six pillars of the Strategic Framework on Climate Change and Development: 1) Make effective climate action part of core development efforts; 2) Address the resource gap though existing innovative instruments for concessional finance; 3) Facilitate the development of innovative market mechanisms 4) Create enabling environment for and leveraging private sector finance; 5) Accelerate deployment of existing and development of new climate-friend technologies; 6) Step up policy research, knowledge management and capacity building

The framework is an interim step to guide World Bank group operations on climate change. Will have adequate consultation over next few months.

World Bank has been focussed on climate change since 1992.

IFC also have a climate change action plan.

There has been a dramatic growth in Bank energy lending and dramatic growth within that for percentage that is for low carbon.

World Bank is trying to maintain neutrality and work with multiple partners.

Bank is also cutting edge on carbon finance. We need to recognise that huge amounts of funding are needed.

The Strategic Fund for Climate Change and Development came out of the Investment Framework for Clean Energy and Development.

The concept was taken to the Bank board in March and received strong support to move forward.

We are designing an outreach programme for consultations.

Need to be in position that as soon as we know what 2012 holds for us we will be in position to move forward.

Rachel Kyte, Vice President, IFC

IFC’s management group changed their strategic objectives to include climate change. There are 5 strategic objectives which flow into Zoellick’s broader objectives for the World Bank group.

Stern says $200 billion is needed of which 80 per cent from private sources. Time is short. The amounts of money are not extraordinary, but getting hold of them is at a time of a global downturn. How should we channel financial flows into countries in transformation?

We will triple our renewable lending over next 3 years and place much focus on energy efficiency. It is troubling that this is not happening to scale. There are real market barriers. How do we drive cleaner production through? Carbon finance has a long history of being active in this.

What is IFC’s comparative/competitive advantage?

Business is paralysed by post 2012 market uncertainty. Zoellick has put much personal attention into this.

What can we do to help private companies understand risks?

Looking at tools, methodologies and instruments and need to be able to measure what we do.

Exposure to CO2 is a risk, we will find out what our portfolio emissions are, and are looking at what guidance should be offering.

We will also work on a shadow price for carbon.

From banking industry there is real appetite for this but still a technology risk. In emerging markets most Banks aren’t very well established

Renewable energies are beyond the reach of private banks. Local banks do not know about them.

Banks aren’t good at taking these risks and need partnerships.

Need to have discipline and development principles about how to deploy money. Get finance to project developers.

Eric Vogt, IUCN

Consultation does not stop with framing of strategy- should be ongoing, real and virtual. Should be multi-layered

Some board members are open to technical briefings of NGOs.

Discussion and questions from the floor

On consultation

Bruce Jenkins: Is consultation process open on both strategic framework and climate investment funds? Donors are having a design meeting next week which is not public, so what room is there for public consultation? Rachel, what will IFC be laying on the table in terms of regional strategies etc?

Janet Redman, Institute for Policy Studies: CSOs need to be involved sooner rather than later in consultation. In CIFs will there be sunset clause post-Kyoto?

David Waskow, Oxfam America: What will consultations address? UNFCCC Design meeting- which government reps will be involved?

Kristen Hite from Environmental Defence welcomed the Bank’s commitment to translating the consultation documents but requested that it stick to its timeline on this. She also made clear demands for a concrete time line and a commitment to build in a response to civil society comments.

Warren Evans responsed: Meetings next Monday and Tuesday will bring donors and recipients together in key institutional issues to work on the scope and priorities. There will be meetings in the next few weeks. Need to take steps to ensure that donors and recipients are on same page.

Rachel Kyte: not a documentary process. “Our strategy is basically a power point”.

: regions are developing a plan of actions for each region’s needs.

On whether there will be a post-Kyoto sunset clause

Warren Evans: I don’t know about the sunset clause. We need to understand what post-2012 looks like. I don’t know which governments will be involved either. We would have liked greater developing country information at an earlier stage.

On the Clean Development Mechanism and carbon finance

A number of NGO representatives from Nigeria and Zambia urged that the Bank stick to the polluter pays principle, and raised serious questions about the World Bank’s involvement in the CDM. Its transaction costs are very high and efforts to use it for some of renewable energy projects in Nigeria have failed.

Developing countries most at risk from climate change most are Africa (as per Warren Evan’s presentation) but there are only about 18 CDM projects in the whole continent. They asked what lessons did he learn from implementation of CDM in Africa?

NGOs emphasised the need more country specific strategy and institutions and legislative frameworks need to be put in place.

NGOs also emphasised that carbon finance will only mobile percentage of money that is needed.

Warren Evans agreed that CDM transaction costs need to come down. There are two new World Bank carbon finance funds trying to deliver in communities with a small carbon footprint and combat the transaction costs issue. These are the bio-carbon fund and the Community Development Carbon Fund. In last year more project ideas have been coming from Africa, though small in terms of GHG emissions or money.

On basic lessons of the CDM, Warren Evans admitted that CDM-supported projects will not be the trick to solve global climate change. It has to be at scale. The Carbon Partnership Facility looking at how we can scale up actions that generate carbon revenues dealing with much larger volumes of GHG reductions this.

On clean energy definitions

In response to the question of what is meant by ‘clean energy’ in relation to the Clean Technology Fund, Warren Evans was unable to answer but agreed that getting a clear definition is very important.

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